Amended 2024 State Tax Form 540 for CA - when to adjust state refund in income

[cagirltaxquestion]

My lender paid my property tax for 2024 late in 2025 and I didn't catch this until recently.

I just submitted a 2024 amended tax form 540 for the state of CA with the adjusted deduction and had to pay an increase of tax from the timing of the deduction moved to 2025. I just submitted the form 540 amendment in 2026 with the check paying the difference with my deduction decreasing in 2024.

Question is - now that I'm filing my tax return for 2025, since I did itemize my deductions in 2025, when do I report the corrected state tax refund difference in my reportable income? I assume I would still report the refund I actually was paid in 2025 from the state (although the amount was too high), and make the adjustment in 2026 tax filing?

[MindyB · Accepted solution]

Yes, you are correct, this will be reported in 2026. As an individual, you are a cash-basis taxpayer, meaning you report events in the year the money is paid or received. On your current 2025 return (filing now in 2026), you must report the full state refund you received in 2025 as income, even though you’ve since amended the return. It should no be adjusted yet because the check you just wrote to CA to pay back the difference is a 2026 event. You will claim that payment as a deduction on your 2026 tax return. 

[cagirltaxquestion]

Thank you so much for the quick reply!!!

[cagirltaxquestion]

Also for when I report this payment/ adjustment for tax year 2026, which section under deductions do I report this in TurboTax? I don’t report it as a credit under income? (Net whatever I am paid this year from the state minus the cash outflow of what I paid back to the state)? Thank you.

[MindyB]

You're welcome!  In 2026 (and every year) you won't net the refunds and payments.  You will enter the refund like normal in the income section.  Then, separately, report the payment you made. In your 2026 software, Go to Federal > Deductions and credits >  Deductions and credits summary > Estimates and Other Taxes Paid >Income Taxes Paid > Other Income Taxes Paid in 2026 > Payments for 2024 or a prior year state or local income taxes paid in 2026.

[cagirltaxquestion]

Thank you so much. Very helpful